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More on the 50-Year Mortgage

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Marketplace interviewed me in Trump Floated a 50-Year Mortgage to Address Housing Affordability. How Would That Work? The transcript reads,

President Donald Trump proposed a 50-year mortgage over the weekend, in a social media post. The idea came from Bill Pulte, the Federal Housing Finance Agency director.

“The average age of a first-time home buyer is now 40 years old. The notion that you’d finish paying off your mortgage at 90 is probably not something that most people contemplate when they want to buy a home,” said David Reiss, a professor at Cornell Law School.

Still, in the short term, a 50-year mortgage would appear cheaper — slightly. Robert Bridges did the math; he’s associate professor emeritus at the University of Southern California’s Marshall School of Business.

“The payment on a 50-year mortgage, for instance, for a $200,000 loan at 6% would be about $1,052, where a 30-year loan would have a payment of $1,199,” Bridges said.

So that’s a difference of $147 in that example. But it comes with costs to the borrower as well, for starters the interest rate would be higher.

“You pay more for a 30-year mortgage than you do for a 15-year mortgage,” Reiss said. “So you will probably pay more for a 50-year mortgage than you would for a 30-year mortgage.”

According to the American Enterprise Institute, a 50-year mortgage would, initially, increase a homeowner’s buying power by 8%.

“Over time, maybe months, maybe years, that would fade,” said Edward Pinto, a senior fellow at the American Enterprise Institute.

Basically, if everyone’s buying power goes up, so does the price of housing. And a longer mortgage also means it takes longer to build up equity.

“And then you’re really left with not much advantage, and you become really a renter with a mortgage,” Pinto said.

A longer loan where it takes longer to build equity also leaves homeowners more vulnerable to risks in the market if home prices stagnate, which Pinto predicts they will in the coming years.

“This has been tried with 40-year loans before, and every time it’s been tried in the United States, it’s failed,” Pinto said.

Failed because they’re too risky, he said. That’s one reason we don’t already have 50-year mortgages.

“It doesn’t seem like this is really the remedy for the housing problem that we all know we have in this country,” Bridges said.

Which is first and foremost, he said, that we don’t have enough of it.

Trump & Pulte’s 50-Year Mortgage

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Politico quoted me in ‘Band-Aid,’ ‘Distraction’: Experts Slam Pulte, Trump 50-Year Mortgage Idea. It opens,

The Trump administration is entertaining a potential plan for the government to back 50-year mortgages to address a housing affordability crisis.

But, in a housing market defined by low supply, industry experts warn that changes in financing are likely to be little more than a “band-aid” and a “gimmick,” while posing bigger risks to homebuyers.

“As a country, the mortgage term is not what we should be worried about. We should be focused on building more supply,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities America.

Federal Housing Finance Agency Director Bill Pulte posted on X Saturday that the Trump administration is working on directing government-owned housing finance companies Fannie Mae and Freddie Mac to support 50-year home mortgages, calling the move ”a complete game changer.” President Donald Trump also posted on his social media platform, Truth Social, supporting the idea.

The proposal comes after Trump directed Pulte to leverage Fannie and Freddie to ramp up the country’s stalled housing production to bring down costs and address the estimated shortage of 4.7 million homes. But the new proposal is raising concerns about whether such a major change to the two giant mortgage financiers’ buying rules could destabilize a central strength of homeownership — the opportunity to build wealth over time.

In a series of follow-up posts over the weekend, Pulte wrote that “a 50 Year Mortgage is simply a potential weapon in a WIDE arsenal of solutions that we are developing right now. STAY TUNED!” He sounded off about other possible ideas like supporting portable mortgages, which can transfer to a new property, and assumable mortgages, which can be transferred to a property’s new buyer.

An FHFA spokesperson told POLITICO, “We continue to evaluate all options to address housing affordability, including studying how to make mortgages assumable or portable.”

And a White House spokesperson said in a statement, “President Trump is always exploring new ways to improve housing affordability for everyday Americans. Any official policy changes will be announced by the White House.”

Experts expect that extending the potential length of Fannie- and Freddie-supported home loans would require congressional support.

Fannie and Freddie don’t offer loans directly to potential homebuyers; instead, they purchase mortgages from lenders to package and sell on the secondary market. This frees up resources for lenders to issue new mortgages.

By purchasing 50-year mortgages, Fannie and Freddie could make the longer-term loans more appealing for lenders to offer. With a longer loan, monthly payments could come down, but it also comes at a cost to homebuyers.

“It would lead to buyers building equity in their homes more slowly. At the beginning of the mortgage, more of those payments tend to be interest… This is more of a stopgap band-aid to address affordability,” said Gennadiy Goldberg, head of US rates strategy at TD Securities.

Sharon Cornelissen, director of housing at the Consumer Federation of America, called the proposal “a distraction” and warned that although expanding the accessibility of 50-year mortgages could lower monthly payments, “the cost of that is that people won’t be able to build wealth through homeownership.”

And as first-time homebuyers get older, the 50-year mortgage appears less manageable, Cornelissen said. Last week, the National Association of Realtors shared findings that the median age of first-time homebuyers had risen to an all-time high of 40.

“So you’ll be 90,” Cornelissen said, adding that finishing payment on a 30-year mortgage is a “stabilizing force” for people going into retirement.

David Reiss, a Cornell Law School professor and real estate finance researcher, said a move toward 50-year mortgages would require homebuyers to rethink how they save for retirement.

“We often hear financial advice that you want to try to pay off your mortgage before the time that you retire,” Reiss said. “So that’s a problem.”